Approving the last set of legislative measures for ringing in the country’s biggest tax reforms, the lok Sabha on Wednesday passed a set of four supplementary Bills for the implementation of the historic Goods and Services Tax (GST) regime from July 1. The GST rollout will usher in a uniform indirect tax regime in the country.
The lower House passed the Central GST Bill, 2017; The Integrated GST Bill, 2017; The GST (Compensation to States) Bill, 2017 and The Union Territory GST Bill, 2017 after rejecting a host of amendments moved by the Opposition parties.
Replying to the seven-hour-long debate, Finance Minister Arun Jaitley allayed the apprehension of members about the inflationary impact of the GST and said the tax reform will make commodities “slightly cheaper”.
“Today you have tax on tax, you have cascading effect. When all of that is removed, goods will become slightly cheaper,” he said.
Jaitley said once the new regime is implemented, the harassment of businesses by different authorities will end and India will be one rate for one commodity throughout the country.
The Finance Minister pointed out that the GST Council, comprising Finance Ministers of Union and States, had agreed to take a decision on bringing real estate within the ambit of the new tax regime within a year of its rollout.
On why the council has decided on multiple GST rates, Jaitley said one rate would be “highly regressive” as “hawai chappal and BMW cannot be taxed at the same rate”. He said currently food articles are not taxed and those will continue to be zero rated under the GST. All other commodities would be fitted into the nearest tax bracket.
The GST Council has recommended a four-tier tax structure — 5, 12, 18 and 28 per cent. On top of the highest slab, a cess will be imposed on luxury and demerit goods to compensate the States for revenue loss in the first five years of GST implementation.
However, the Central GST (CGST) law has pegged the peak rate at 20 per cent and a similar rate has been prescribed in the State GST (SGST) law, which takes the peak rate to 40 per cent which will come into force only in financial exigencies.
Jaitley said the cess would be transient for a period of 5 years so that the proceeds can be utilised to compensate the States. Touted as the biggest taxation reform since Independence, GST will subsume central excise, service tax, VAT and other local levies to create a uniform market. GST is expected to boost GDP growth by about 2 per cent and check tax evasion.
Earlier, introducing four Bills in lok Sabha Jaitley said the legislations will have to be passed by Parliament and one by each of the State Assemblies to turn India into one market with a single tax rate.
“These are revolutionary Bills which will benefit all. ...States have pooled in their sovereignty into the GST council, and Centre has done the same,” he said. Prime Minister Narendra Modi and several senior members of the Union Cabinet were present in the House when the four Bills were taken up for consideration and passage.
The Finance Minister said 12 meetings of the GST Council, having 32 representatives from States and Union Territories, were held to ensure consensus on the recommendations for the rollout of the GST regime.
Initiating a discussion on the four GST Bills, Congress leader Veerappa Moily said what the NDA Government has brought about in the name of a “revolutionary tax reform is not a game changer but only a baby step”. Criticising various provisions in the proposed GST regime, Moily said it will be a “technological nightmare” and the anti-profiteering provisions in it are “far too draconian.”
“Seven to eight years have passed after the erstwhile UPA Government wanted to bring the GST Bill. Some parties then felt it should be halted due to reasons best known to them,” he said. The former law Minister said due to the delay caused in the rollout of GST, the country lost around Rs 1.5 lakh crore annually and put the total loss at Rs 12 lakh crore.
Moily also slammed the Narendra Modi Government for “high as well as too many taxes under the proposed GST system which he said does not reflect the original spirit behind the new tax regime.”
“The one nation, one tax concept is only a myth. There are too many rates, cesses. What you brought today cannot be called a game changer but only a baby step,” said Moily. Referring to the “complexities” in the inter-State transactions proposed under the GST, he called some of the provisions as “retrogade”.
AIADMK member Venkatesh Babu termed the GST as the biggest tax reform initiative post independence but said there were many challenges in its proper implementation. He said Tamil Nadu, being one of the manufacturing States, had initially opposed the GST Bill but it was happy that some of the concerns of the State were addressed.
TMC member Kalyan Banerjee said the West Bengal Government led by Mamata Banerjee has in-principle supported the “path-breaking” GST legislation but expressed concern over the Government’s hurry in its implementation. Banerjee said it was West Bengal which always fought for cooperative federalism and fiscal autonomy and the rights of common people and small traders.
Raising concerns, Bhartruhari Mahtab (BJD) said that everybody was saying that the GST law will be a game-changer but “we (BJD) believe that it will be illusionary to expect too much from it”. Mahtab also questioned the need of the anti-profiteering clause, saying “we have a competition law in the country. Why is the anti-profiteering clause in the BillIJ I fail to understand this. This is a retrograde step”.
Citing the definition of agriculture in the GST Bill, he said “You are bringing agriculturists to the tax net. Agriculture is being taxed. Can we deny itIJ” He said four states were against this but their suggestions were not accepted by the GST Council.
“Share cropping is now going to be taxed by this Bill. Widening the tax net is one thing” and bringing some people into it is different and it is highly objectionable, he added.
Attacking the GST Bill, Mohammed Salim (CPI-M) said “are we replacing Parliament” with the GST Council. He also pointed out that the Government was claiming to bring far reaching changes “but are we not outsourcing the law- making processIJ Are we making the GST Council a clone of Parliament,” he asked.
Salim also said that in the name of widening the tax net, the Government wants to bring agriculture in that net.